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IF THE SUMMER MONTHS HAVE had any message for investors, it's this: Options volatility can be feverish, reversion to the mean can be a mean process, and stock markets are as likely to zig as to zag, despite all the market wisdom.

The biggest swingers this summer and likely beyond are options on the Chicago Board Options Exchange's Market Volatility Index (ticker: VIX) -- which offer direct exposure to volatility. And more volatility is expected, if September and October follow seasonal-trading patterns.

But how do investors see December? Standard & Poor's 500 puts -- the traditional way portfolio managers hedge stocks -- are still popular, but not always in the listed market. Instead, many institutional investors have turned to the over-the-counter market to buy December 1200 and December 1400 S&P 500 puts.

To position for expected increase in stock-market volatility, Michael Schwartz, Oppenheimer & Co.'s chief options strategist, recommends that investors consider an October "bull spread" on the VIX options. He likes buying the October 22.50 VIX call and selling the October 27.50 call. This expresses a view that options volatility may incrementally increase around so many closely-watched market events. "You can't straddle this market," Schwartz says, noting that VIX straddle prices are high. "You have to have the conviction to play one side or the other, and fear favors the upside."

Many of the biggest stock investors have reached the same conclusion. A growing number are starting to sell puts on stocks they've been watching and considering buying in coming months, according to a strategist who is advising them. These investors are taking advantage of elevated put prices (while the VIX has recently declined, one volatility arbitrager says many put prices have actually increased) and are positioning to buy favored stocks should the shares decline below the put strike prices.

Meanwhile, some big trades in deep in-the-money S&P 500 Index options sparked speculation that someone is preparing for the stock market to drop some 50%. Anything is possible, but it seems these so-called "bin Laden trades" -- the macabre name given to the trades as September 11 approaches -- represent a market maker borrowing money from the S&P 500 trading crowd by executing a "box trade." The box is formed by creating call and put spreads with September 700 and 1200 S&P 500 options.

According to Jon Najarian, founder of trading-advisory service optionmonster.com and a former CBOE specialist-firm owner: "On the floor of the CBOE, hundreds of millions of dollars of such trades happen every day. Arguably, the CBOE is one of the largest banks in the world, and since all options on this or any of the six U.S. options exchanges are cleared through the Options Clearing Corp., there is no contraparty risk."